Diesel fuel demand surges 7% in 2004

StephanieI. Cohen

WASHINGTON (MarketWatch) - A revved up industrial sector and jump in trucking drove the nation's thirst for diesel fuel sharply higher last year, far outpacing growth in gasoline demand, the American Petroleum Institute said Wednesday.

Deliveries of low-sulfur, required for on-road diesel engines, jumped 7 percent in 2004 to an average of about 3 million barrels a day, said Ronald Planting, head of API's information and analysis department.

It was the biggest jump in diesel demand since 1996, despite a 20 percent rise in diesel prices at the pump, which averaged $1.81 a gallon nationwide over the past 12 months.

At the same time, the uptick in demand sent the nation's distillate fuel inventories -- which include diesel - to a level 9 percent lower than where they were at the start of 2004 and their lowest levels since 2000.

Deliveries across all major petroleum products rose 2.3 percent last year, the strongest growth rate in five years, according to API.

Jet fuel rebound

Deliveries of jet kerosene fuel saw their first annual increase in four years.

But this growth, reflecting an increase in the volume of commercial air traffic, still lagged by six percent peak deliveries seen in 2000.

Summer supplies

Retail gasoline prices averaged their highest annual inflation-adjusted level since 1985, which moderated demand for the fuel in the second half of the year, according to API.

Gasoline deliveries in the first half of the year rose 2.3 percent over year-ago levels.

"But as the effects of higher retail prices sank in during the second half, deliveries then eked out an increase of only 0.4 percent," the API report said.

Looking ahead, current gasoline inventory levels suggest there is enough supply to meet expected summer driving demand, said John Felmy, API's chief economist, although he added that inventories are not the sole indicator of supply levels.

Gasoline inventories at the end of the year stood at 212 million barrels, the highest year-end level in three years, according to API.

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